Asian Development Outlook 2015 forecasts economic indicators and notes further support needed for enterprises.
While Vietnam's economic performance continues to improve, further structural reforms that allow greater participation by local firms in global value chains is needed to enable the economy to reach its full growth potential.
The comments were made in the "Asian Development Outlook (ADO) 2015" report, released by the Asian Development Bank (ADB) today. The report forecast Vietnam's GDP growth would edge up to 6.1 per cent in 2015 and 6.2 per cent in 2016, with foreign-invested enterprises being an important driver.
The ADO also forecast annual inflation at 2.5 per cent this year and rising to 4 per cent in 2016 as domestic demand and global oil prices pick up. "Better economic performance in the major industrial economies, particularly the US, Vietnam's biggest export market, will help spur export growth," said Mr. Tomoyuki Kimura, ADB Country Director for Vietnam. "Vietnam is also expected to be a net beneficiary of lower global oil prices, which will increase disposable incomes and lower business costs."
The report also indicated that while Vietnam's economic performance slowly improves, a number of structural factors continue to limit its ability to reach its full growth potential. In the short term, priority should be placed on strengthening the banking system and outlining a clear strategy to resolve non-performing loans. Growth will also be supported by new laws to guide divestment by State-owned enterprises and accelerate their equitization. Lifting economic growth over the longer term, however, will rely on Vietnam's ability to undertake deeper structural reform, in particular to support the integration of domestic enterprises into global value chains.
The private sector is crucial to unlocking the potential for economic growth and strengthening public-private dialogue would improve the implementation of policies on small and medium-sized enterprises (SMEs). According to Mr. Dominic Mellor, Country Economist at the Asian Development Bank Vietnam Resident Mission, to strengthen SMEs' capacity to participate in global supply chains, efforts are needed to strengthen inter-agency coordination, particularly in the formulation and implementation of SME policies. "Greater consultation with the private sector would also help to identify constraints that inhibit links with production networks," he said. "Industry-specific strategies that support industry clusters and economies of scale are also needed."